Tuesday, May 6, 2008
"People in Second Life are still putting real money into fake stock markets and losing it all," said Jonfromtexas Holiday, the author of the report. "Nothing has changed."
In the actual world, the collapse of the mortgage-backed securities market and hedge funds leveraging interest rate spreads, or 'alpha', has forced Federal Reserve Chairman Ben Bernanke into dramatic rate cuts and emergency measures not seen in generations. That has included a multi-billion dollar bailout of brokerage house Bear Stearns with taxpayer-guaranteed U.S. Treasury notes and a reduction of the core Fed Funds rate to 2%.
This news has had "zero impact" on virtual stock markets, according to Holiday's report. "Monetary easing has not influenced fake stock prices at all. Fake stocks are still difficult to trade, the fake exchanges are closed down after a couple months, and the principals quickly vanish, blaming hackers, software upgrades, or untimely accidents every time they disappear from the world.
"Speculators in these virtual stocks are promised unrealistically high rates of return by dubious companies with no articles of incorporation, no board of directors, no regulators, no listing standards, and rampant conflicts of interest," the report states.
"This kind of high yield investment scam can be used to steal from financially unsophisticated people, no matter what is happening in the real world."
Central bankers across the globe have taken on more than two hundred billion of dollars worth of mortgage backed securities onto their books as collateral for new loans to major financial institutions in an increasingly desperate attempt to offset the deflationary impact of housing declines and a sharp reduction in consumer spending.
That is the equivalent of more than fifty trillion (50,000,000,000,000) Lindens being injected into global financial markets, but this vast amount of money has had absolutely no influence on the actual value of virtual companies and fake stock markets whatsoever.
"In contrast, avatars have entrusted 50,000 Lindens to Ronin Piggington and his 'Metaversal Dreams Corporation," Holiday said. "That's about $200 US. Unfortunately, Ronin has vanished from Second Life after being eaten by lions, according to the last message posted on his Metaversal Dreams website by his 'brother.'
"Those avatars who 'invested' with him are not going to get their money no matter how much the Federal Reserve or the European Central Bank eases monetary policy in the face of the current crisis," Holiday said.
"Your Money, Your World, with Kanomi Pikajuna" is a weekly look at financial matters affecting your bottom line.